In studies of the encoding and processing of information in the peripheral auditory system, we have recorded sequentially from hundreds of different cochlear nerve fibers in the same animal, using both cats and chinchillas. By carrying out Fourier analysis of the resulting period histograms, it is possible to obtain measures of response amplitude and phase for frequencies present in the stimulus and for frequencies that represent distortion products generated in the cochlea. These studies have demonstrated striking similarities between the spatial distribution of distortion signals of the same frequency, suggesting that both are propagated in the cochlea by the same mechanism. We have carried out similar studies in chinchillas with organ of Corti altered by exposure too high-intensity sound. These studies have shown that either permanent damage or reversible fatiguing greatly reduces generation of propagating distortion products if the alteration is present in the cochlear region in which primary stimulus frequencies overlap. Parallel modelling studies, using a nonlinear version of a cochlear mechanical model developed by Spenner and Cox, show distortion generation and propagation effects that are qualitatively very consistent with our cochlear nerve fiber studies. Preliminary results of studies of cochlear microphonic potentials in the chinchilla that we have recently initiated have found responses that are consistent with our neural results regarding propagation of distortion products. These results are contrary to results previoulsy reported by other investigators; the apparent discrepancies need to be resolved before firm conclusions can be stated.